Commentary and musings on the complex, fascinating and peculiar world that is securities regulation

Friday, April 12, 2013

FSC Chair Hensarling Says the Committee Will Consider Legislation to Repeal Dodd-Frank Orderly Liquidation Authority as Part of Ending Too Big to Fail

In remarks at the
Center for Capital Markets Competitiveness, Rep. Jeb Hensarling (R-TX), Chair
of the House Financial Services Committee, emphasized that too big to fail must
be ended. He noted that the Dodd-Frank Act codified too big to fail with two
provisions. The first is Title II, providing for an orderly liquidation
authority; and the second is allowing FSOC to designate financial firms as
systemically important financial institutions.
Becoming a SIFI is a double-edged sword, he observed, since, while the
firm is subjected to enhanced regulation, the designation implies a federal
bail out . The Chairman said that the Committee will take up legislation to
repeal Title II and repeal the provisions authorizing FSOC to designate SIFIS.

He said that there
was regulatory timidity and confusion before the financial crisis. But there
was no lack of regulatory authority among prudential regulators before the
crisis. Dodd-Frank has bestowed an enormous level of discretionary power on
regulators.

Chairman
Hensarling also noted that the weight, volume, and complexity of federal
financial regulations must be alleviated. In addition, he said that, in
adopting regulations, the SEC must carry out a thorough cost-benefit analysis.
The Chairman said that Congress should pass the Regulations In Need of Scrutiny
(REINS) Act so that Congress would get to approve significant federal
regulations and thus enforce regulatory accountability. The Act would require
Congress to take an up or down vote on all new significant regulations before
they could be enforced.